ITI - Earnings call transcript Q3 2020

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Operator

Good day, and welcome to the Iteris Fiscal Third Quarter 2020 Financial Results Conference Call. Today’s conference is being recorded.

At this time, I would like to turn the conference over to Todd Kehrli, MKR Group. Please go ahead, sir.

Todd Kehrli

Thank you, operator. you financial in XXXX results ended XX, thank to conference third and December Iteris’ discuss for XXXX. afternoon, for today‘s participating call quarter Good its fiscal

Bergera; President Groves. CEO, Iteris’ Mr. are today company’s CFO, us Mr. Joining Joe and the Doug and

we’ll call for remarks, your the open their questions. Following

future should are undertaking that company, the the updates future. may of on we Iteris statements make are that based participants date, remind later regarding continue, assume today which from comments future obligation of subject in to may results course future to and discussed differ substantially at to today like the Before valid. or performance a performance. forward-looking provide be is the of this statements we’d events company’s are change information, will not still Actual what all during the statements call, current one these from no we to forward-looking guarantees is an and not

Iteris from with the contained documents refers factors cause to time forms the important most company’s which and time specifically any XX-K, forward-looking materially are identify actual that files recent from the could contain you differ statements. risk the and SEC, those to X-K, company that that to XX-Q in results the of

the financial to section I’d Relations www.iteris.com. quarter webcast that and metrics supplementary website call Investor third you company’s remind our a on everyone of report like will find of of a at replay the today’s

Iteris’ Please Mr. Bergera. to like proceed. President over turn and I’d the CEO, to Now call Joe

Joseph Bergera

for Thanks afternoon, Todd. today. you, Thank Great. good us everyone. And joining

press ended financial for close XXXX. December the our saw fiscal a you at market, the quarter of results we XX, third announcing As release issued

prior continued million total same our to strong relative In period. $XX.X representing agriculture digital mobility smart solutions. QX, to revenue, a the in We year increase recorded for XX% and demand Iteris experience

forward. attributable of some Some moving the project to revenue growth is

consensus analyst have timing we this However, even for effect, the would exceeded without quarter.

pleased very we’re our with results. So

prior third And quarter was of third $XX.X increase. total net same quarter a record $XX.X period. year third quarter the is was represents than and total our year-over-year million XX% a which backlog Our bookings million, XX% better ending

of Systems due Now recognized In let segment. of $XX.X to versus overview combination million brief segment provide our representing a increase Transportation by in QX, a performance segment’s the The year prior a was Albeck growth and revenue, me to XX% period. strong organic the growth of integration Gerken expectations. July meet from continues $X.X and At time, of X. the of in of acquisition our all our complete million is Gerken contribution revenue the original this acquisition on Albeck same

notices call, that In our of proceed, in quarter’s the five affected receipt second quarter results. earnings to delays noted we which

X we only particular of As segment’s modest on received had the the the X impact of December notices of XX, but revenue those timing proceed, third organic quarter to notices XXXX, a results.

We one expect three XX outstanding notices days. more the next of in proceed to the remaining receive to

In bookings these the significant the to awards to bookings to converting despite continues delay in then revenue. experience the specific growth and meantime, segment contract

third recorded to bookings Orange main Orange Systems $XX the million $X.X a net quarter, same and include quarter period. street which relative During our from cities. a year increase X Transit of quarter the across traffic third corridor segment is third prior the County Notable contract Transportation safety County authority flow million, XX% bookings to increase of

intersection-as-a-service I’m of includes this sorry, which includes monitoring Iteris’ health throughout provide the solution, corridor. contract contract intersect XX/X and - system This device will

for use value County. million as of for for million measurement traffic under new operations and a of transit and order performance use a our agencies software contracts Several in from operations system branded $X.X design A rail of analysis $X $X.X commercial total solution task subcontract new for and Angeles our services million provide light clear Los vehicle various guide products. software-as-a-service

which transit total bus is on provide contracts Chicago authority. for advanced additional of division priority various from $XXX,XXX a PACE, system, of traveler suburban $XXX,XXX regional information signal agencies for the Several contract value system transit a for a hosted which provide we software a basis, and the

With million the segment’s backlog, strong year-over-year. quarter bookings, Transportation represents which third Systems segment the a ended quarter with increase the $XX.X in XX%

$XX.X constrained the result which recorded Roadway limit season In QX, XX% the because Sensors and holiday sales with inclement installations. this for especially our the historically increase. year-over-year a third segment pleased due of revenue to million, were We quarter weather, window product representing are

and remain detection performance products. our to competitors, cloud-enabled products our of our differentiate we to superior enhance our While detection continued further core in quarter related will services, we inherent demonstrably our the which is believe third

example, to analytics and we live app our video provides VantageLive. new to intersection And traffic platform, additional access and SaaS-based analytics real-time that engineers For enhancements a released intersection technicians traffic mobile remote video. streaming

representing revenue, which to QX, increase performance, of XX% increase quarter. segment In Culture compared experienced a Analytics bookings Ag year recognized represents prior same third a $X also strong segment bookings year-over-year. our million, the $X recording million The net XX% in quarter Weather

three account Notably, penetration. recent bookings additional represent meaningful

to of For companies largest annual $X crop million. science one in our bring the expanded revenue this recurring of ClearAg from world’s one example, its QX, use account

Iteris. Andy want walk Doug development. contributions take Schmitt of financial minute to partner Before our previous to and during asset he his a to Groves, the through thank I turn a I results, to strategic And business for our strong was stage call over to a

of Iteris’ Doug Doug unique Looking development. to next that’ll add of talent ahead, set a I’m delighted brings vital expertise and however, the to stage team. be to

you With comment that, can on results? our financial Doug,

Douglas Groves

good Joe. everyone. Thank And afternoon, you,

press the reminder, the the our on of document please for further and a during filing, description today. see key posted website release under company’s XX-Q financial matters discussion a As metrics call

we’ve favorable including During continue business with certain trends increasing XXXX, seen our improve growth, the backlog and expansion. margin quarter, the top in of fiscal key performance third year to in year-over-year the metrics, line

of the detail to move the I’ll results. Now

$XX.X $XX.X million fiscal mentioned, quarter XX% for Joe in total to compared quarter to same the the year As ago. revenue increased a million XXXX, third

Our improvement driven quarter in improved The the XX.X% quarter to mix the was last by were third and year. margins gross increased XX.X% product volume margins across portfolio. from in same compared the

expenses over were $XXX,XXX in to in nonrecurring up severance Operating transition million second the The quarter year and the sequentially million $XX.X and includes $XX.X same were compared the quarter $XXX,XXX in third quarter increase prior of sequential XXXX. executive costs.

our better get as of fiscal One is operating we we new goals manage as as P&L my into expenses, that primary so CFO in and the leverage our more beyond. move to XXXX year operating

$X.XX same million share in or the $X.X net of $X.X GAAP a a share loss third million in quarter ago. The per in quarter quarter year was per $X.XX reported the the year. $X.X million company operating third loss The with last with compared $X.X compared or million

million a loss a in by basically $X.X major of this approximately on year non-GAAP achieved per the $X.XX quarter milestone breaking per a compared even with or share net We same non-GAAP quarter basis share or $X.XX ago. a

previously we non-GAAP communicated, well second to and the As in expect XXXX, we’re half be profitable on of do we’d way. our

me turn the let Now results. to segment

the Systems XX%. $XX.X million revenue this an $X.X million in Gerken increase prior Albeck was quarter, Our year of $XX.X contributed compared growth. of million to Transportation

more driven related margins we segment. to compared the XX.X% The $X.X scale increased Operating $X.X year. get compared in to and XX.X% was was by were year million million volume margin last the operating as income this primarily quarter prior from expansion

versus product $XX.X year to XX% and million XX%. operating increase $X.X million were revenue quarter to related margins compared Sensors year, by an increased Our Roadway Operating mix. and year, $X.X compared was favorable or in million driven was the XX.X% the of $XX.X volume the income prior million last last

Our several breakeven $XXX,XXX drive agriculture revenue versus increase loss is and almost improvement $X $X.X with This was weather year million million over the with about the XX%, goal prior business or million an last at this next consistent continuing our in compared to of quarters. analytics $X.X to the operating quarter to year. of

nonrecurring to $X.X in expenses an related were initiatives to $X.X I on. mentioned, in $XXX,XXX is by charges company and strategic million transition million driven costs was $XXX,XXX Corporate costs This in of previously prior increase and the several year. benefit executive working and severance compensation increase the the compared

to and in and spent short-term reflecting Turning in quarter, model. the Total resources. we investments are and expenditures business costs $XXX,XXX and software liquidity cash asset-light capital capital capitalized our $XX.X million,

to capital. I continue working position as our see going should to mentioned, we be profitability, in focused forward. And on cash build improving improvement with We our start expected

With I call that, the So I’ll and be in time. the summary, this such we’re pleased with couldn’t our progress to turn be delighted to exciting an company Joe. over back at quarter, more joining

Joseph Bergera

Iteris and fourth during position a you, in trends on our mobility we and Thank capitalize remains I XXXX smart Doug. favorable appreciate that Great. quarter, secular digital agriculture. And it. in fiscal strong market introduce to focus clear management expand smart innovations being platform, differentiation and enhance our competitive infrastructure service addressable product primary with our mobility. continue our our mobility to Iteris will

us will of revenue better to package new platform portfolio promote while believe for We sources this and and smart company. products enabling the of mobility recurring also services, enable our

analytics our weather three Although the opportunities road segments unique of of and to ClearMobility that’ll describe. and the fourth reporting two of our transportation beyond, product pursue segments quarter each line moments to a our and additional segment, agriculture platform will spans in weather our take couple continue

a team a small, includes The business complemented hybrid sales small, focused into sales has by of which mix model a for segment national dedicated strategic national consultant-led software a pursuits team. Systems on model, our development and Transportation matured pursuits, sales dedicated

And XXXX, believe produced the opportunity model model strong our this the will a fiscal has continue areas. and results with fourth from robust strong highest sales three in to quarter and a year rate coming conversion of for of we This full conversion bookings pipeline rate. produce

ClearGuide, our software-as-a-service adoption customer product products, our and of example, commercial SPM vehicle operations Iteris for family. First,

and managed is our managed a offerings, of business software-enabled which as adoption process customer service, Second, service. such of outsourcing intersection services

in the acquisition penetration our and we Texas, Gerken. enhanced the presence significantly course, where with Albeck additional third, of have And Florida, of Midwest, recent

segment’s range. in Systems fiscal fourth quarter, level income improvement operating dollars. growth our and mid should gross and to margin the Transportation the XX% a segment sequential margin quarter in year-over-year Based the service realize segment operating should yield our on mix, forecasted modestly product fourth expand In

discuss Roadway the Sensors Now let’s segment.

continue segment three to of more growth We year drive believe full will XX%. factors than

product product First, several market detection revenue for share our that products. continue increase and core innovations will to

of of of organization. such in third, programs and implementation channels, sales increase And SaaS customer sales indirect stickiness including from customer services, revenue optimization and to differentiation, the success an the our further the our enhance Second, productivity VantageLive!. and our direct cloud-enabled as product

to to Sensors largely the for While modest in prior segment is Roadway growth revenue to digits. more the we XX% than continue year, quarter we more increase the to comparable. due The difficult full expect fourth expect grow single period mid the

an for a led alternative purchasing we of pent-up we in number significant our remember, in fourth were had to may that of orders state spike Texas revenue you prior process that finally a cooperative quarter. As to able the

This to we segment’s fiscal higher quarter, on XXXX fourth similar expect quarter to margin segment’s our fiscal income gross the however, be expand should operating revenue. third margin XXXX

And discuss analytics agriculture finally, let’s weather business. our and

market fiscal increase and During adoption customer of the will fourth our penetration strategic leverage XXXX, continue position accounts. quarter to increase to existing ClearAg’s we enhanced in

to a segment’s further improvement cost quarter, our revenue ClearAg in investment net containment decline, performance. Due in growth in expect fourth the income continued in to and further operating we our resulting

the summary, anticipate mid-teens revenue be quarter half the in and teens. growth continue we high revenue In total to in fourth to second

in and to investment we ClearAg sequential operating corporate Transportation income Additionally, expenses the hold a while flat. increase Roadway our to further expect dollars, Systems produce continue and Sensors our decreased segments in net essentially we

this positive quarter half. non-GAAP and As fiscal for our should fourth enterprise-wide our XXXX second Doug income operating noted, yield

Now questions comments. delighted be and Operator? your to I’d to respond

Operator

B. question ahead. comes with Please Thank the first queue you. Sinderen in go from Riley. Jeff [Operator Our Instructions] Van

Jeff Van Sinderen

congratulations say quarter. see. me on Great metrics the let First, in to strong the

Just are the those wanted couple X the And to a you’re convert. converting, to contracts it QX. were, to guess, sounds I expecting circle and discussion that more converting to low like around back of

going on you Maybe you us think that? could how to your color can just P&L? that of other sense give see hit a you us give Any we’re revenue

Joseph Bergera

sure. Yes,

to could proceed. least were, because I thing, that and think confidence were - is in say to off because one results, last come we never quarter one some is to degree that we at perhaps in, we hit frankly, with of have major to our want contracts to originally of have quarter. we those would I our had job didn’t those that messaging done surprised to high converted five second we contracts original a of at guess, notices order were just We a expectations. five of better achieve So meant needed I trying revenue on start all least our We context based these of say of one that, receipt to

needed context. never to wanted said everybody So all sure I just We we five. understands make that

saying in queued just were We’re quarter. convert were of to we our that get didn’t up second we shocked frankly one five to revenue

them So and late two the point, this the of a they that because will quarter to effect associated They to did revenue certainly contracts have results. anyway, from at converted - the revenue, the expecting quarter in that specific we’re of our in that recognition third fourth revenue contribute that’s to growth third minimal with our converted our in And two those quarter. QX one of reasons sequential QX. will had

within XX days. We expect next convert another one the to

ultimately, quarter. will in the be will So our it our to convert. growth And in two other going sequential first add early That forward. quarter to could also our fourth be

five make second we that understands, just now sure to one they’re growth to would to sustain of We everybody single all glad will to them they in were see continue just again, not to quarter. shocked that revenue, did, sequential forward. never and have going starting we’re that converted and expected But a the convert

Jeff Van Sinderen

SaaS if then to And can a bit revenue. your hear. turn recurring we or to good Okay, little

said I’m QX? that, LTM recently, if latest was the you for had including XX% about mistaken, was it, XX if And what I running that think you months. figure not

Hopefully do percentage then on we now? higher. say, that focuses product And revenue think looking, might think a revenue SaaS out given about recurring evolution penetration be? your platforms, recurring should year Where let’s from how you that

Joseph Bergera

want on comment Do that that, yes, split? recurring revenue to you

Douglas Groves

Sure.

So Groves. Jeff, Doug

SaaS but a percentage remained we constant, - as alluded our it platforms. Joe, see So there to start was revenue, continued momentum to as of several by did in of

rate rate. growth expecting revenue the grow much of growth than we’re that So overall should that, faster company’s

substantially double customers on growth would than the we we SaaS these that company, rate new more that our platforms. adoption the So talk we be about digits when low get for more as expect to from

Joseph Bergera

recurring future Jeff, when than more build earnings ‘XX. next on our our more And, basic feel that for just with like at that we foreseeable enterprise is absolutely future. on comfortable is we’ll expect and respect But our revenue I Doug in color providing think that growth greater point total will the commenting on expectations, to what - his be the - rate growth FY call, to be we’ll

Jeff Van Sinderen

many you think that installed to can of hear. Okay, good some base? I guys kind of you And have then us just Maybe out how number us remind there. forget sensors the what is in

smart to the how as to the the how future? towards if think in be the you or you able And that end of continue produce those sensors monetize will, provide? do data might move data And markets about you mobility, value

Joseph Bergera

Is that all, Jeff?

Jeff Van Sinderen

Yes.

Joseph Bergera

Yes.

then there strictly and I country yes, intersections. phase signalized there could but some is a So detection industry. actuated signals They and view a the We, talk where is XXX,XXX, of in the have time simple is is so by the the between number in - XXX,XXX about debate intersections is XXX,XXX, largest based, intersections. that well, far, refer no simply occurring. anywhere the there’s to - timing have let’s signalized timing the those usually

be magnetometers lot a of under pavement, A And which mean vehicle field, or presence extrapolate adoption magnetic loops. they to loops have which also there there’s intersections wired or are a will detect wide of those must and they placed the magnetometers, there. of the wired

of less advanced running call XXX,XXX would those, we Probably To have detection than the aboveground aboveground advanced total of or say, would date, detection. intersections XXX,XXX minority let’s or are the XX% detection. what

market. of intersections leader those detection. base aboveground in have by excess We major in XX% would the are with the of installed We that far

intersections still running But still have a of technology, number outdated there magnetometers, that signals. is huge it are more there’s simply actuated

intersections that Greenfield opportunity detection. And those us a certainly so aboveground advanced for represents convert to or to

growth. a it are There especially lot then sun will But built development, and there signalized. the note become to to of of lot a new that is be across continuing economic that, of lot intersections, established a which intersections be important are they’re to belt, continues

there everybody third the very less actually than percent, a only think that million signals. or intersections XXX,XXX even have and it of total over small are a important, X.X a in And I country total understands is about

the the the and of these speed - can pedestrians, collect, which analysis those from to ours to month-to-month, of compares collected from respect information vehicles, that’s changed we’ve there’s intersection, of number number plethora those intersections. of an there’s advanced that data kind an look vehicles, time the bicycles, pedestrian, sensors at just trend to day-to-day, With of such you how vehicles, bicycles type as at number those other intersections, it do able the a pass-through including the how detection the to of are vehicles, of

it’s amount collect. we a that data of So tremendous just

though remind they processing that, sophisticated we’re at applying to may that of connected and just edge, are against collecting these signalized, interesting also, edge unfortunately, And a data intersections, all we’re everybody even AI and anything. lot be not data, if the that even doing increasingly to very

historically, of and that so to And can the increase we get we’re we stranded. intersections, we’re to with working monetizing data service many, so Cisco introduced that That’s that collecting. why there the that data VantageLive!, believe that has the to are access companies we and data. connectivity And communication providers like ways many been

but was everything hopefully, was got answers, So there, big, I complicated a that Jeff. question, which pretty - hopefully what

Jeff Van Sinderen

taking else you true jump job. somebody appreciate a Thanks did I’ll in. It was. for my that No, great let I questions.

Joseph Bergera

Sure.

Operator

Latimore from Capital Please Northland the Our queue Markets. go Mike ahead. in with next question comes

Mike Latimore

Great, great. Congratulations. Looks thanks.

your you there can talk any strength And terms a the important about bit, you of regional how of just weakness? some areas flavor, on performed? are but or of some states of more little In maybe touched

Joseph Bergera

Good question. Mike. Yes. Sure,

West win strength the see the I in particularly which a entire by country. lot way, So by is, a Systems the the and intelligent of Coast, huge us. market a mentioned, market. far, the major for It example, to for California we largest deal, remains OCTA in for Transportation on California, was - the continue

in And a leader so market, to leader going to be a market in. a if you’re a that’s be great

we’re And continue so own geography. to this to glad

want But there. that stop don’t we being to said,

utilize agreement know, because so actually Texas, year last fully a our has a now a business as been cooperative to presence being pretty purchasing you in which And in Sensors worked has us able against delay was established resolved. there there, which Roadway

our Sensors Texas. Systems has our presence business growth business years. anyway, interestingly, couple huge a over to we - segment in last geography Transportation that in market. huge our Systems Roadway have modest actually Texas a Transportation exposure seen But the significant And we’ve in But of had the has

continues. That

We got of a We’ve very, Texas, tracking more Texas. backlog and opportunities we’re of in very already continue business. large the to win number state in sizable a

of front feel state. I about So in the confident in that us very opportunities

Texas, markets is another system five by top geographic for country. the the of way, transportation largest one intelligent entire the in

largest third period. both exposure market Sensors Roadway over and some And our where last market Systems The our a the has had business Transportation is that’s Florida.

honest, be has penetration our our to But both segments. been modest for of

win deals to that and about will we’re large, able hope in convert very talk the pursuing very and market in exciting We which market, continue business Sensors be I to that future. in new near Roadway some we

made we the Florida in Our in as but Southeast And alone, segment up for the business $X of Systems it’s our excess in of which third $X increase recent million quarter acquisition a us. mentioned, has of is Gerken. - huge I our secured Transportation excess of considerably million think broader Transportation Systems I Albeck bookings in benefited mostly from region,

the results sort business street. the our And and existing seeing development ability for and it’s to we’re Albeck on positive the largely acquisition our feet the from that of leverage and infrastructure on Gerken’s based - relationships

so And expect that market considerably. we to grow

Mike Latimore

should then is Albeck And that to - a on Gerken Or that some of good. in we number? good there Very terms the contribution basis? to of seasonality Is quarter. think baseline a quarterly as that

Joseph Bergera

Yes, excellent question.

seasonality. bit of is So a little there

our ago as So a couple But slow business, our our us. XX tried of allude prepared Systems kind and remarks. guys seasonally ending period in may December Sensors just you Transportation to period of quarter of Roadway for recall, third moments it is we the for typically, a to

the our that we the down season the the because exposure have to generally amount Northeast. that’s units. concentrated and and products for of business Northwest Pacific And our then sort decent impact a And have kind deployment to holiday do of Sensors tends in Roadway sun belt, weather Systems in the and absolutely And Transportation explaining, reasons the those we of of slow geographies. tends to Midwest

days. our kind in many don’t actually unique. We was slow But some of recent just billable as counter most that’s a quarter. saw generally, We quarter, have of which seasonality kind

And kind everybody in has revenue in is slow because Gerken. so lot in Gerken summer. be for season Albeck you September, disruption late to that the a hurricane and get a of Anyway, of most Albeck the as seasonally reverse into There’s period the of knows, their Florida. concentrated typically tends

tends most their XX, to because the one be in great strongest, to period, And recent weather be ending December Florida. tends really of

thing that historical our seasonality of the good smaller much Florida balances is somewhat, in out again, regions. is still other than presence our although, So kind

information each another unique sure of Gerken seasonality our we’ve probably wanted, got anyway, of kind twist. that scenarios then wanted yet But I Albeck to more you make in adds segments everybody -- than understood but that you and that’s

expect revenue. said of we forward, going is growth for Now Gerken XX%. the our of which in that continue in to the Systems the with But $X excess were acquisition, Albeck consistent would Transportation approximately to million Albeck grow what be certainly Gerken was we’ve time at overall we doing segment, saying

revenue the ending softer weather. period December little be to the million, If XX it a higher a little bit revenue in period the on revenue XX in and $X you September due averaged out, average, quarterly with would about ending bit

So hopefully, helps, Mike. that

Mike Latimore

position was want longer-term correctly. your very got quarter? comment? sure just No, to build fourth question, last in this perfect. make I the I that cash Yes, Or expect Did you a to you say

Joseph Bergera

comment on that. Doug let I’ll

Douglas Groves

it cash as snap - as in build back a we exit the head in on the year we positive. increase into we’ll in should And to to use definitely down QX. an turn We to some product cash sensors yes, will the see transition and expect turn this we non-GAAP due we but current to inventory inventory quarter to the business, quarter slight profitability, start in Yes, had corner related ‘XX. that start -

Mike Latimore

Okay, great. Thanks a lot.

Operator

Our Craig-Hallum Ryan next question Sigdahl Please queue comes with go in Capital Group. from ahead.

Ryan Sigdahl

Hey, guys.

was maybe Joe, you sales. in was first in? explain off, So pull that there remarks think your some I prepared that in that what was? forward what mentioned Can segment you allude or then And

Joseph Bergera

sure. it Transportation segment, related visibility to was which Yes, Systems don’t own some good as to That labor. a as in our our and effort, was have we direct subcontract

bit a got that. surprise. surprise, positive we a Was we so liked a So of

total of revenue in a little bit to like be range $XXX,XXX. would $XXX,XXX, the closer The probably forward pull $XXX,XXX to probably

say certainly consensus that And that analyst I that clear with would want notwithstanding it positive. I we beat the So forward, was have about wasn’t to that. to do estimate. with pull But want people insignificant. respect still revenue to be

was great not pull and don’t associated consensus it really because was bit a would’ve I pull feel still strong case. had this people result So number like, had was there content. and But to well, regardless. with exceeded forward, subcontract only analyst they there a this oh, the We forward, want of little that’s

Douglas Groves

year-over-year a It for had bit revenue Ryan, split quarters. really the it’s the between a unchanged from from year, growth were just what quarter perspective. last of So talking little full we about

Joseph Bergera

for year, true the it’s Obviously, since that’s true the And true. half. absolutely for

our the and but changing expectations was not movement QX of little Systems, a we’re half, So there Transportation QX for between subcontract for the revenue. bit

Ryan Sigdahl

versus then that said it’s QX. elaborate R&D, it that to And I run to pulled corporate $X.X and think on? expect so what can costs Yes, then you guess, for flat. And spent million you right I QX up on that’s quarter-over-quarter the of out going rate that Is remain forward? being it. relates Got as QX. then you

Douglas Groves

R&D. because the it was up was of a Well, less - little of capitalization there bit

the fluctuate we’re to brand-new brand-new from that efforts So sustaining it’s between we’ve on quarter-to-quarter, spending products functionalities. got products going or the versus

it’s between and what in that say quarter quarter. the saw would I range So a third probably the second we

Ryan Sigdahl

the me. Great one crop the of Last how in you talk to now? about science Great. has then from ARR the evolved? before relationship scope for million large how to company. services that $X Can And see changed

Joseph Bergera

Yes, sure.

to digital they’re the particular into - their So farming the farming digital feature continue And its as embedded expand extending ClearAg platform. result, of And of use this they their set platform. a customer has ClearAg.

don’t to preannounce And digital particular this so planning platform. I like is what customer do farming want their with to get

So as to I their they’re than largely well, geographic-driven. to expanding avoid or somewhat from guess, also from other capabilities capabilities-driven a largely going feature into perspective getting opposed perspective. to specifics I’m And - a kind that their of I’m use, extending a But say a platform. geographic as result, they’re function perspective as but it’s

use for in element using ClearAg the to uses some their digital of that, also as a ClearAg addition internal adopted addition of they’ve essential platform. In to farming

Ryan Sigdahl

queue. hop I’ll in the back guys. Good Thanks, luck.

Joseph Bergera

Thanks.

Operator

go with Mike Instructions] question next ahead. Shlisky Please our [Operator take Dougherty from And we’ll & Company.

Mike Shlisky

of you on and follow-on large customer ramp-up as a Good profit group? the at the the if now, the us I’m possible. a trying to that Can looking sense side? afternoon, you’re guys. Can side right to the and give is about pipeline what last smaller positive both a sense question to customer opportunities there, Ag to get for Weather I maybe that

Joseph Bergera

sure. Yes,

farming ClearAg cases, to other they support customer field as sort talked potentially smaller agribusinesses, the functions. pipeline allied platform, large providers continues provider or your they point, then we digital marketing and between their their distinguish - service use function In or the and deals. to and of into such of the robust, In of, I opportunities the to that sort agribusiness ClearAg R&D solution for sales So kind incorporate to their tend large about. ag we be their - just internally case of

program And generally, that be deployment. each, for individual in to sort a minimum generally those for larger program $XXX,XXX deals tend sort use. of, of ARR would of expect We

also to then significant a we grow customer can penetration the of interested about. as together of number programs would eventually, And one And we’re that. expect them that stream programs. account Those like realize talked in a seeing I result

opportunities as we’ve we deployed customers. continue see at more large to yet agribusinesses But programs that we opportunities new be to within so We to see our anyway, agribusiness still look to penetrate. penetrate large pipeline, our for existing additional

that Those manufacturers, other ag variety literally Tier irrigation hundreds, and of then there thousands and purposes. use crop X providers of additional X equipment allied would if science companies, are include a and ag companies, solution not Tier ClearAg additional providers for

components in software our probably hundreds just - companies. have products we the certain into with use literally field, it embed we of opportunities their can perform And smaller or agronomists these They tasks. their

interesting mix we customer of and opportunities. continue the pipeline there’s nice consistent growth adoption. to really So And in see

independent That is said, the has of probably want materialized being on for I that, ag continues thought. being the - just largest clearly my be overall think solutions say to it’s ClearAg forward than going to the the independent ag we expectation that in in to marketplace. opinion, market - slower already But digital go solution said, record I will growth digital my

about about as same as independent just solutions, leader, overall be we revenue So - containment. isn’t about investments. growth, talking talking the to result, while had we not also And that a thoughtful market we’re as And the is is, cost are we’re trying expected. very as for sizable we’re the sizable at time, our

based that this segment mentioned, believe Doug expectation be both few is the expectations, on as within breakeven reasonable be will what I quarters. next we to growth And our and

Mike Shlisky

us what it spaces you’re wanted I the kind you you’re Can you ask certain of over few Okay. secondly you’ve more, even with along next seems, activity. Clearly, update be quarters. now? to about That’s great cash far might looking the last got And pursuing? targets? How on from year, in right you’re M&A color. generating what

Joseph Bergera

Yes.

So have I’ve talked actually, this and in kind doing things. doing what a great on we’re to interesting fresh we’re lot, think how perspective look I take a it’s because get somebody at Doug’s come it’s new and and of to

So talk maybe, about kind of you could Doug, that?

Douglas Groves

Sure.

but both begin its not to I think, identify good just has, vet in I think process targets. targets, the company for place the So only size, the a set to

smaller As the targets you a are imagine, can on scale. much of lot these

a from as So same putting some level that much, that effort little deal larger. are much the challenging small more it’s perspective, because takes a almost bit of together

have and that environment of look growth going be say the we got But story to is our as at ones forward. we we’ve pursue. I would we solid, making plenty in part a of So selective things the acquisitions at to which look

Joseph Bergera

reasons guess, And but in add both, and more definitely transportation ag Yes. would in the that we a I many that variety transportation space. see see opportunities we for opportunities I of to that, just market,

And be be going so will they’d that much acquisitions my than expectation we additional do more forward, is and agriculture. transportation likely to

Albeck lot distribution where transportation a it’s And to in and of point, we got be or of bimodal on acquisitions you’ve more due of companies a relatively Gerken. the to valuations odd an and probably curve, really size kind less Doug’s the few small, that sort ones little big do - of will

opportunity things there together that’s formidable substantial create there’s these we And that. and believe to do platform. our that that expectation of string a we’ll a And number

Mike Shlisky

on. Okay. pass it color. Thanks I’ll for that

Operator

turn time, to And remarks. call like I at back would for the to closing this management

Joseph Bergera

Thank All you. Great. right.

So on Investor to we appreciate the that upcoming at everybody’s be thoughtful note couple your questions. presenting want do a conferences. of Relations I support we’ll front, and

February the Institutional FBR XX for in B. Technology So Francisco JMP Conference the and please May San Riley look XX. on Investor Hills on Securities And us Beverly Conference XX. at in

forward set visit are time please the So with conferences, attending us and/or again us when XXXX it results. And look In there. call. concludes I if with today’s we to on year and continued visit quarter you’re report our progress come up while hope presentation our to Thanks, fiscal our any everybody. of you updating that, you’ll our we fourth these some full see meantime, - you

Operator

you, Thank gentlemen. concludes and today’s ladies presentation. This

You may now disconnect.+

Iteris (ITI) 4 Feb 202020 Q3 Earnings call transcript